US oat millers are scrambling to find oats to keep their facilities operating as a result of the challenges with moving grain by rail in Western Canada.
Oat futures prices in Chicago spiked to an all-time record high this week, as end-users are frantically looking to source oats - the majority of which are grown in Manitoba and Saskatchewan.
"The millers are desperately looking left, right and centre. It's a squeeze on the old crop side because they can't get enough product coming into their plants. They're buying futures instead, and I'm assuming there's some hope that someone will have to deliver against those contracts," said Brian Voth, vice-president of operations with Agri-Trend Marketing, a company that helps farmers with selling their grain. "It really highlights how big of an issue the transportation and logistics have become here."
There was even a rumour that the supply shortage had caused PepsiCo's Quaker Foods to suspend operations of its large oat plant at Cedar Rapids, Iowa yesterday. That was not the case, confirmed Quaker's senior director of communications Candace Mueller-Medina.
"We will continue to monitor the situation closely. However, we do not anticipate any business interruption at our Cedar Rapids facility at this time," she said. "Our team is dedicating a tremendous amount of time and energy to ensure consumers receive the high quality oats they have come to expect from us."
Both the main Canadian rail companies - CN and CP Rail - have indicated they're focused on moving grain to the West Coast and are not taking new orders for grain cars headed south, said federal Agriculture Minister Gerry Ritz earlier this week.
"The railways have decided arbitrarily that no cars will be going into the US, and that's really not their role," said Ritz after meeting with the railways in Winnipeg on Monday.
With millers in Minnesota and Iowa paying a premium for any oats they can find, farmers in Manitoba and Saskatchewan who grew a large oat crop last year might be willing to move their crop to the processing plants themselves, noted Voth.
"With the bids where they are today, you could certainly pay for an awful lot of trucking to get it south. When you factor in basis down in the US, the bushel and dollar conversion, it works out to somewhere in the area of $6.50 a bushel Canadian delivered into Minneapolis or Iowa," he said.
However, the alternatives to rail are becoming more expensive or more difficult to find, added Voth.
"Producer cars are running behind schedule now too, and truck freight has probably climbed by almost 50 percent since fall. These companies have so much grain coming at them that they can basically charge what they want and take the loads that they want," he said.
Oat futures prices in Chicago spiked to an all-time record high this week, as end-users are frantically looking to source oats - the majority of which are grown in Manitoba and Saskatchewan.
"The millers are desperately looking left, right and centre. It's a squeeze on the old crop side because they can't get enough product coming into their plants. They're buying futures instead, and I'm assuming there's some hope that someone will have to deliver against those contracts," said Brian Voth, vice-president of operations with Agri-Trend Marketing, a company that helps farmers with selling their grain. "It really highlights how big of an issue the transportation and logistics have become here."
There was even a rumour that the supply shortage had caused PepsiCo's Quaker Foods to suspend operations of its large oat plant at Cedar Rapids, Iowa yesterday. That was not the case, confirmed Quaker's senior director of communications Candace Mueller-Medina.
"We will continue to monitor the situation closely. However, we do not anticipate any business interruption at our Cedar Rapids facility at this time," she said. "Our team is dedicating a tremendous amount of time and energy to ensure consumers receive the high quality oats they have come to expect from us."
Both the main Canadian rail companies - CN and CP Rail - have indicated they're focused on moving grain to the West Coast and are not taking new orders for grain cars headed south, said federal Agriculture Minister Gerry Ritz earlier this week.
"The railways have decided arbitrarily that no cars will be going into the US, and that's really not their role," said Ritz after meeting with the railways in Winnipeg on Monday.
With millers in Minnesota and Iowa paying a premium for any oats they can find, farmers in Manitoba and Saskatchewan who grew a large oat crop last year might be willing to move their crop to the processing plants themselves, noted Voth.
"With the bids where they are today, you could certainly pay for an awful lot of trucking to get it south. When you factor in basis down in the US, the bushel and dollar conversion, it works out to somewhere in the area of $6.50 a bushel Canadian delivered into Minneapolis or Iowa," he said.
However, the alternatives to rail are becoming more expensive or more difficult to find, added Voth.
"Producer cars are running behind schedule now too, and truck freight has probably climbed by almost 50 percent since fall. These companies have so much grain coming at them that they can basically charge what they want and take the loads that they want," he said.